Former finance minister P Chidambaram agreed the objective behind withdrawing Rs 500 and Rs 1,000 notes is “sound” but questioned the introduction of Rs 2,000 notes if the idea is to check black money. He added a similar move by the Janata government in 1978 had “failed to achieve its objective”.
WATCH VIDEO: Here’s What The New Rs 2000 Note Looks Like
Governments in the past had considered a similar move but “the consensus was that the economic gains may be very small and the disruption and inconvenience may be very large”, he said. The move, he said, has come as a bolt from the blue for the common man. “They took the decision… the manner in which it will be implemented alone will decide whether it was a wise decision or not,” he said. The replacement of old notes by new should be done quickly, efficiently and with the least inconvenience to the people, he said.
“We will have to wait and see how far those objectives (stamping out black money) are achieved. The question is how efficiently will the older notes be replaced by the new notes,” he said. With the wedding season set to begin, he found the timing “surprising”.
Chidambaram said the exercise would cost Rs 15,000-20,000 crore and the gains of demonetisation should be at least equal to that. He said the “economic wisdom” of the decision will be tested on three parameters. “The cash to GDP ratio is 12%; will it come down to the world average of about 4%? The value of high denomination notes currently in circulation is about Rs 15 lakh crore. Will that come down significantly? Will gold imports surge indicating that unaccounted income/ wealth may seek refuge in bullion and gold jewellery? If the vast majority of the old Rs 500 notes are legally exchanged for the new Rs 500 notes, what purpose will be served…?”
About Rs 2,000 notes, he said, “If new income or wealth is unaccounted, will that not be hidden in the Rs 2,000 notes? How is demonetisation of high denomination notes served if a new and higher denomination note is introduced? Government must explain this apparent puzzle,” he said.
About the government claim that the move will curb terror funding, he said: “Yes, a very small proportion of this money may by used for terrorist activity but I think that is an exaggeration… Counterfeit money, the RBI itself has put out… it is only 0.7 per cent of the notes in circulation.”
Rahul targets Modi
Rahul Gandhi tweeted: “Once again Mr Modi shows how little he cares about ordinary people of this country — farmers,small shopkeepers, housewives — all thrown into utter chaos. While the real culprits sit tight on their black money stashed away abroad or in bullion/real estate. Well done Mr Modi.”